A Guide on How to Get a Mortgage in Dubai
Debt Burden Ratio (DBR)
Maximum DBR:
Not to exceed 50% of gross salary and any regular income from a defined and specific source.
Assessment:
Financial institutions should consider the borrower's specific circumstances and not just apply the maximum DBR automatically.
Stress Testing:
Loan providers must stress test the loan at 2-4 percentage points above the current interest rate. If an introductory rate applies, the stress test should reference the rate that will apply after the introductory period.
Investment Properties:
Deduct at least two months’ rental income from DBR to account for non-rental periods.
Post-Retirement:
If the loan repayment extends beyond retirement, ensure the borrower can service the loan at a DBR of 50% of post-retirement income.
Loan to Value Ratio (LTV)
A. UAE Nationals
• First House/Owner Occupier
Each borrower can only claim one property under this category.
Value of Property less or equal to AED 5 million - maximum 85% of the value of the property.
Value of Property more than AED 5 million - maximum 75% of the value of the property.
• Second and Subsequent House or Investment Property
65% of the value of the property, regardless of value.
B. Expatriates
• First House/Owner Occupier
Each borrower can only claim one property under this category.
Value of Property less than AED 5 million - maximum 80% of the value of the property.
Value of Property more than AED 5 million – maximum 70% of the value of the property.
• Second and Subsequent House or Investment Property
60% of the value of the property, regardless of value.
C. All Categories
- Property purchased off plans
Given the long term nature of the development process and the higher level of risk to completion, the maximum LTV for mortgages on property being purchased off plans is 50% regardless of purpose, value, or category of purchaser.
Maximum Term of Loan
Loan Tenor:
Maximum 25 years.
Age at Last Repayment:
Determined by the mortgage provider's risk policies.
Maximum Financing Amount
As per Article 3.1, the DBR cannot exceed .50%
In addition, the maximum financing amount allowed is as follows:
UAE Nationals:
up to 8 years annual income.
Expatriates:
up to 7 years annual income.
Source and Frequency of Repayment
Sources:
Salary, verifiable business, or rental income.
Exclusions:
End of Service Benefit cannot be used.
Repayment Frequency:
Minimum quarterly, with principal and interest on a reducing balance basis.
Interest Only Period
Applicable Loans:
Only for investment loans.
Non-Repayment Duration:
Principal non-repayment not exceeding 5 years from first drawdown.
Acceptable Collateral
Requirement:
A first-class mortgage in the name of the mortgage provider must be taken on all financed properties.
Government Housing Schemes:
If a first charge cannot be created, alternative measures like second charges should be in place to protect the loan collateral.
Additional Costs
• Registration Fee:
4% of the property value.
• Mortgage Registration Fee:
0.25% of the loan amount.
• Property Valuation Fee:
AED 2,500 to AED 3,500.
• Agency Fees:
Typically 2% of the property value.
Mortgage Application Guide
1. Pre-Approval:
• Obtain a mortgage pre-approval to understand your borrowing capacity and budget.
• Pre-approval helps determine suitable loan amounts and interest rates.
2. Property Selection:
• Choose a property that fits within your pre-approved budget.
• Ensure the property meets the bank’s lending requirements.
3. Submit Application:
• Submit the mortgage application along with all required documents.
• Documents typically include income proof, bank statements, passport and visa copies, and property documents.
4. Loan Evaluation:
• The bank will conduct a property valuation to determine its market value.
• The bank will also review your credit history and financial situation.
5. Final Approval:
• If the evaluation and review are satisfactory, the bank will issue a loan approval letter.
• You will need to sign the loan agreement with the bank.
6. Complete the Transaction:
• Complete the property purchase transaction and pay the down payment.
• The bank will disburse the loan amount to the seller or developer.
7. Repayment:
• Repay the loan according to the schedule outlined in the loan agreement.
• Ensure timely repayments to maintain a good credit record.